Shell (RDS.A) Stock Up on Speculation More Deals are in the Works

NEW YORK (TheStreet) -- Shares of Royal Dutch Shell (RDS.A) are higher by 1.11% to $64 in pre-market trading on Thursday, following a Reuters report suggesting the independent oil and gas company is considering making some small energy deals in North America, even after its acquisition deal to acquire BG Group Plc., Shell's director of Americas exploration Marvin Odum told the online publication in an interview.

Shell said its cash reserves are constrained following its $70 billion deal to buy the British multinational oil and gas company, but is still considering smaller deals in the North American basins where it currently operates.

Shell's North America business makes up 15% of its global oil and gas production, Reuters noted.

Odum told Reuters that the BG deal "doesn't make us shy away from bolt-on," even though "it is hard to believe there is something big out there that is compelling."

Separately, TheStreet Ratings team rates ROYAL DUTCH SHELL PLC as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:

"We rate ROYAL DUTCH SHELL PLC (RDS.A) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its attractive valuation levels, largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • RDS.A's debt-to-equity ratio is very low at 0.26 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.90 is somewhat weak and could be cause for future problems.
  • ROYAL DUTCH SHELL PLC' earnings per share from the most recent quarter came in slightly below the year earlier quarter. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, ROYAL DUTCH SHELL PLC reported lower earnings of $4.70 versus $5.18 in the prior year. This year, the market expects an improvement in earnings ($7.17 versus $4.70).
  • RDS.A, with its decline in revenue, slightly underperformed the industry average of 37.8%. Since the same quarter one year prior, revenues fell by 40.1%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • The change in net income from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Oil, Gas & Consumable Fuels industry average. The net income has decreased by 1.8% when compared to the same quarter one year ago, dropping from $4,509.00 million to $4,430.00 million.
  • You can view the full analysis from the report here: RDS.A Ratings Report

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